How am I taxed? Can I pay myself a salary?

[Dustin Awtrey]

So I am working on this project that once I am done will be cash flowing around $5000 per month after all expenses are paid. I want to quit 9-5 and become full time RE investor. I plan on property managing myself as all these units are brand new and will not need much maintenance. My question is will this be taxed as passive income? and what is the best way to pay myself a salary to live off of? weekly? monthly?

[Michael Plaks]

@Dustin Awtrey

You leave us guessing what is "this project." My guess is that you're rehabbing a small multi-unit property which will be rented.

If my guess is correct - you do not need to pay yourself salary. Your income will be taxed as regular passive income, and you can transfer money out of your business bank account to your personal bank account anytime, probably monthly. The transfers do not create any additional taxes.

Yes, you could also structure it in a more complicated way, with an actual salary, but you need a good reason to do so, which is a longer conversation.